Kachikwu: Subsidy removal may not affect pump price

Ibe Kachikwu, the minister for state of petroleum resources, says the removal of oil subsidy may not affect the pump price of premium motor spirit (PMS).

Speaking in Abuja on Thursday, Kachikwu said “there is so much emotion around subsidy issues” and the government would not technically be removing subsidy but focus on spending very little on it.

“My focus is that, the federal government shouldn’t spend as much as it is spending on subsidy,” he said.

He said the issue of subsidy existence or removal, is no longer business as usual, as the NNPC is now taking an intellectual means of tackling the matter, without affecting the poor.

“You all know that the president has stated it, that in all we do, we must make sure that the poor people are not affected.

“It has become intellectual, it’s no longer about taking a number, yank it off, take off subsidy and we go. What we are doing is reviewing the PPPRA template, how can we reduce some of the cost elements? How do we deal with foreign exchange so there’s some stability in terms of the exchange rate?

“If we could close the amount of product that are smuggled out of the country, the effective consumption of the country cannot be more than 35 or 36 million (litres per day).

“If we take this analysis, we can deliver products today with the price of oil where it is and also sell close to the prices we have today without the need of the federal government to pay subsidy.

“It is not that we have removed subsidy but the application of market forces will enable you to sell products as close to the prices we have today.

“Is it going to be between N87 and N90? we will have to get PPPRA to do those templates and at 35 million (litres) we may sell products at N87; by the time we consume 36, we may be selling at N90 or N91”.

He said a band would be adopted to ensure crude sells within N87 and N97, depending on the price of crude oil and the modulation of PPPRA.

“Today the prices are largely close to N87; there might be no need to change the price by January, and it might go up or come down slightly by April.

“It is all the dynamics of what the crude is; so, I have not put a static figure, myself and PPPRA will sit down and do the calculations and be able to announce what price PMS will sell in January.

He said that the refineries would not be relied on until the state of their maintenance was completed, adding that Federal Government had agreed that it would not sell them at their present state.

COMPANIES THAT WILL TRADE NIGERIA’S OIL IN 2016

The NNPC also issued its 2016 crude oil term contracts to 21 companies, who would be expected to be the only traders of Nigerian crude.

According to Reuters, the contracts cover 991,000 barrels per day (bpd) of oil, worth $13.5 billion at current crude oil prices, which is roughly half of Nigeria’s crude oil production.

The refiners on the list are Spain’s Cepsa, Italy’s Saras, India’s IOC and ENOC of the Emirates, while trading houses are Trafigura, Mercuria and Vitol.

The international oil companies are ENI, Total, Exxon and Shell.